Owens Corning (OC)

Building and construction materials manufacturer Owens Corning (NYSE:OC) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 2.9% year on year to $2.68 billion. Next quarter’s revenue guidance of $2.15 billion underwhelmed, coming in 12.5% below analysts’ estimates. Its non-GAAP profit of $3.67 per share was 1.2% below analysts’ consensus estimates.

Company Overview

Credited with the discovery of fiberglass, Owens Corning (NYSE:OC) supplies building and construction materials to the United States and international markets.

Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.

Other companies that offer insulation, roofing, and composite products include Beacon Roofing Supply (NASDAQ:BECN), Boral (ASX:BLD), and Kingspan (LSE:KGP).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Owens Corning’s 9.6% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Owens Corning’s recent performance shows its demand has slowed as its annualized revenue growth of 5.8% over the last two years was below its five-year trend.

This quarter, Owens Corning missed Wall Street’s estimates and reported a rather uninspiring 2.9% year-on-year revenue decline, generating $2.68 billion of revenue. Company management is currently guiding for a 24.3% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 3.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

Owens Corning’s gross margin is slightly below the average industrials company, giving it less room to invest in areas such as research and development. As you can see below, it averaged a 28% gross margin over the last five years. Said differently, Owens Corning had to pay a chunky $72.02 to its suppliers for every $100 in revenue.

Owens Corning’s gross profit margin came in at 28.2% this quarter, up 5.3 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Owens Corning has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.4%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, Owens Corning’s operating margin decreased by 13.6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Owens Corning generated an operating margin profit margin of negative 12.2%, down 30.6 percentage points year on year. Conversely, its gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Owens Corning’s EPS grew at an astounding 26.7% compounded annual growth rate over the last five years, higher than its 9.6% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Owens Corning’s earnings to better understand the drivers of its performance. A five-year view shows that Owens Corning has repurchased its stock, shrinking its share count by 23.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Owens Corning, its two-year annual EPS growth of 3% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Owens Corning reported adjusted EPS of $3.67, down from $4.38 in the same quarter last year. This print slightly missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Owens Corning’s full-year EPS of $14.07 to shrink by 4.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Owens Corning has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 12.1% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Owens Corning’s margin dropped by 4.7 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Owens Corning’s free cash flow clocked in at $752 million in Q3, equivalent to a 28% margin. This result was good as its margin was 7.8 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Owens Corning hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14.2%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Owens Corning’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Owens Corning reported $286 million of cash and $5.61 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.54 billion of EBITDA over the last 12 months, we view Owens Corning’s 2.1× net-debt-to-EBITDA ratio as safe. We also see its $123 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its revenue guidance for next quarter missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 8.6% to $112.21 immediately following the results.

Updated: December 4, 2025 at 10:10 PM EST

Are you wondering whether to buy Owens Corning or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Owens Corning doesn’t pass our quality test. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking.

Owens Corning’s P/E ratio based on the next 12 months is 11.3x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $140.63 on the company (compared to the current share price of $112.05).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.